In this morning’s data, the Consumer Price Index increased 1.2% in March and 8.5% on an annual basis, only slightly higher than expected on an annual basis, but again higher than the previous month. Monthly prices for Fuel Oil, up 22.3%, and Gasoline, up 18.3%, were strong while Used Cars and Truck prices were weak, down -3.8% for the month. The core rate, which excludes prices for food and energy, increased 0.3% in March and 6.5% on an annual basis, less than expected. Overall, core inflation measures are slightly less than expected but inflation is still high and price pressures on consumers remain. Fuel and gasoline prices were especially high, but there was some relief at the end of the month. While the dynamics of the pandemic and the resulting fiscal programs initiated higher prices in the economy, the Ukraine conflict has augmented the issue. As spending moves from goods to services in concert with fading virus concerns, some inflationary pressure should abate. That dynamic, coupled with financial conditions in the months ahead, will guide the Federal Reserve in tightening their policy through interest rate increases and reducing the size of their balance sheet. In all, the 10-year US treasury yield ticks lower following the report and equity futures are higher as we head into the market open.
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